Princess Cruise Lines

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Princess Cruise Lines

10100 Santa Monica Boulevard
Los Angeles, California 90067
U.S.A.
(310) 553-1770
Fax: (310) 284-2857
Web site: http://www.princesscruises.com

Wholly Owned Subsidiary of Pacific and Oriental Steam Navigation Co.
Founded: 1965
Employees: 8,500
Sales: $1 billion (1996 est.)
SICs: 4480 Water Transportation of Passengers

From its stronghold on the Pacific, Princess Cruise Lines is the world’s third largest cruise line behind Carnival Corp. and Royal Caribbean Cruise Lines. At more than 30 years old, Princess is one of the U.S. market’s oldest continuously operating passenger ship lines. Its roster of 65 cruises, including a worldwide tour scheduled to set sail in March 1998, docks at more than 225 ports on six continents.

Popularized by the television series “The Love Boat,” Princess Cruise Lines is so closely identified with the late 1970s, early 1980s show that it continued to use the tagline “It’s more than a cruise, it’s the Love Boat” through the late 1990s. Over the course of its more than three decades in business, the Princess fleet has expanded dramatically. In 1965, it operated one converted ferryboat with a 318-passenger capacity, plying the West Coast of Mexico. In 1997 it owned a coterie of eight “floating resorts” that shuttled nearly 500,000 passengers to 230 ports around the globe each year. With the addition of three more “Grand Class” ships, the line expected to have annual capacity for 750,000 passengers by the turn of the 20th century.

Founded in 1965

The Princess line was founded in the fall of 1965 by Stanley MacDonald, a Seattle entrepreneur. It was named for its first ship, the 6,000-ton Princess Patricia, a ferryboat chartered from the Canadian National Railways’ fleet. Princess Pat had a 318-passenger capacity. Princess was among the first lines to popularize cruises to the west coast of Mexico—dubbed the “Mexican Riviera.” Come summer 1966, the ship returned to its tasks for the railroad in Alaska and Canada. Following a second successful season shepherding snowbirds seaward, MacDonald chartered an Italian-made ship and dubbed it, quite logically, the Princess Italia. Continued high demand for berths led to the charter of the Princess Carla for the 1968 season. In 1971 MacDonald leased the Norwegian vessel Island Venture and renamed it the Island Princess.

But MacDonald did not stay in the cruise business for long. In 1974 he sold Princess to Great Britain’s Peninsular and Oriental Steam Navigation Company (P&O), one of the world’s oldest and largest diversified shipping firms. With the financial backing of this industry giant, the California-based cruise line purchased the Island Princess as well as its sister ship, the Sea Venture. A retrofit transformed the Sea Venture into the Pacific Princess, a 20,000-ton vessel with room for 640 passengers. P&O also transferred its Spirit of London to Princess, which renamed it the Sun Princess. The line canceled its leases on the Italia and Carla. Within a year of its adoption into the P&O family, Princess had become one of the world’s largest passenger cruise lines.

The Love Boat Years

Still, a fiscally fit parent company, nicely appointed ships, and top-notch service might never have brought Princess the fame and growth it earned by becoming affiliated with a television series. Airing for nearly a decade from 1977 to 1986, “The Love Boat” was produced by Aaron Spelling and became one of his longest running projects. Set on the Island Princess and the Pacific Princess, the show featured a core cast consisting of the ship’s crew and a revolving cast of well-known celebrities embroiled in a variety of lighthearted plots. The sitcom placed a strong emphasis on romance and exotic destinations.

In addition to putting Princess’s “seawitch” logo in front of millions of viewers worldwide each week, the prime time show has been credited with introducing cruising to a younger clientele, thereby broadening the industry’s appeal from a core group of wealthy retirees to middle-income people in their 30s and 40s. No longer merely a means of transportation, cruising became a vacation end unto itself. Christopher Boyd of Florida Trend asserted,” The Love Boat’ television series, featuring a Princess ship, helped change the image of cruising. Suddenly, cruising meant romance, intrigue and beautiful people.” From 1979 through 1993, the industry grew at a compound annual rate of 9.4 percent. Princess cultivated the “Love Boat” image long after the show was canceled, even using the “Captain Stubing” character, played by actor Gavin MacLeod, in promotions and television ads.

1980s Expansion Culminates in Merger

Princess was one of three cruise lines operating in the United States to seize the growth initiative in the mid-1980s. Princess took delivery of its first custom-built passenger ship, the Royal Princess, in 1984. This vessel, which could transport nearly three times as many guests as the line’s first ferryboat, moved all guest cabins to the outside of the ship, thereby giving all its passengers the luxury of an ocean view. The line’s fleet grew to five ships with the 1986 adoption of P&O’s Sea Princess. It was not long before the tide of cruisegoers rose to meet this capacity; from 1983 to 1994, the passenger count exploded from about a half million to 4.5 million.

Adding vessels to the fleet enabled Princess to expand its roster of destinations, giving its passengers a wider choice of vacation spots. Princess was one of the first to popularize cruises to Alaska, a destination that became an industry hot spot in the late 1980s and early 1990s. And though it concentrated for many years on European, Alaskan, and Mediterranean routes, the line was by the mid-1990s offering cruises to Asia, India, the Holy Land, South America, Hawaii, and the all-important Caribbean.

Princess emerged as one of America’s largest passenger fleets in 1988, when P&O acquired Sitmar Cruises, a line headquartered about 300 yards from Princess, for about $210 million and merged it with the existing U.S. operation. James Nolan of the Journal of Commerce and Commercial characterized Sitmar as the “Cadillac of the industry.” Travel Weekly’s Jerry Brown called the marriage “one of the biggest events in the cruise industry in many years.” The union added the Star, Sky, Dawn, and Fair Princesses to the fleet, which by this time totaled nine ships. It also expanded Princess’s cruise routes to include New England and South America. At about the same time, P&O consolidated its U.S. cruise, hotel, motorcoach, and rail operations under the Princess name and logo. These included the Denali Princess Lodge, Kenai Princess Lodge, and the Fairbanks Princess Hotel, all in Alaska.

Nonstop Growth in the 1990s

Anticipating the continued expansion of the cruise industry at a rate of ten percent annually through the 1990s, the “Big Three”—Carnival, Royal Caribbean, and Princess—became embroiled in a race to build ever-larger ships with greater capacity for people and amenities. Aside from the obvious ability to carry more passengers, there were several advantages to building larger ships. They generated more than three times the cash flow of their 1,000-passenger predecessors and provided economies of scale in overhead and purchasing by spreading out the cost of running a single vessel among this larger client base. Victoria Hallstrom of Lehman Brothers told Travel Weekly’s Ernest Blum that the new “superships” and “megaships” had the potential to “pay for themselves in five years.”

Their massive size also made room for an array of activities and amenities that put these ships on a par with vacation destinations like Las Vegas and Walt Disney World. Families were a particular target of these behemoths; on-board distractions included play areas for kids, media rooms and dance floors geared toward teens, and more traditional casinos, bars, health clubs, and Broadway-style shows for adults.

Decommissionings in 1990 and 1991 made room for Princess’s $1.5 billion-plus investment in gargantuan new “superships” dubbed the “Grand Class.” These massive cruise ships had passenger capacities of more than 1,500 each, yet offered roomier staterooms and more private balconies than their predecessors as well as spacious public areas. The Crown Princess, launched in 1990, and the Regal Princess, introduced in 1991, weighed in at 70,000 tons and had room for 1,590 vacationers. The 1995 launch of the 77,000-ton Sun Princess added room for nearly 2,000 passengers. Its sister ship, the Dawn Princess, was launched in 1997 and dispatched to the waters of Alaska and the Caribbean. In addition to two more 77,000-ton vessels, Princess planned to christen the “grandest of the grand” (to date), the 109,000-ton Grand Princess, by the end of the decade. With a capacity for 2,600 passengers, the ship was too wide to navigate the Panama Canal.

Though the cruise line retired three other ships during this period, it kept the two original “Love Boats,” the Island Princess and the Pacific Princess, in operation. The Island Princess, in fact, was scheduled to offer Princess’s first-ever world cruise, a 64-day trip from Rome to San Francisco beginning in March 1998.

Company Perspectives:

The Caribbean, Alaska, Europe and the Panama Canal, these are just a taste of the world that awaits you on ships as legendary as the places they visit. You can journey as far north as Norway’s North Cape and as far south as Tierra del Fuego’s Cape Horn. You can circle the continents of South America and Africa and traverse the Indian Ocean and the North China Sea. Dropping anchor in over 200 ports on six continents, Princess goes to the ends of the earth to bring you an unforgettable cruise.

Princess was not the only leading line building mammoth cruisers in the 1990s. Industry leaders Carnival and Royal Caribbean were also busy ordering 100,000-ton-plus vessels, continually upping the stakes in the battle to build the biggest boats. These across-the-board capacity increases kept the Big Three’s market shares fairly constant throughout the 1990s, maintaining a high level of competition among the top rivals. In fact, while Princess doubled its berths in the last decade of the 20th century, Carnival Corp. increased its capacity by more than 450 percent and Royal Caribbean boosted its volume by nearly 370 percent.

Princess distinguished itself among its competitors with technological and marketing innovations during this period. The company developed sophisticated in-house booking, reservation, and management information systems and cooperated in the creation of tourist agency networks like Apollo, Sabre, and Worldspan. In 1997 Princess won praise for its introduction of a unique financing package dubbed the “Love Boat Loan.” Though it charged anywhere from 14.9 percent to 26.9 percent interest, the program allowed vacationers to finance the cost of a cruise for up to 48 months.

The cruise line suffered a black eye in 1991, when two passengers videotaped a Princess employee dumping bags of garbage into the ocean off the Florida Keys. Worse than the $500,000 fine was the public relations scandal that followed. Princess was able to redeem itself by inaugurating a comprehensive waste management program dubbed “Planet Princess.” Within just a few years, the line had won praise from some of the cruise industry’s biggest environmental critics, including the Center for Marine Conservation.

By the mid-1990s only seven percent of Americans had taken a cruise, leading many in the industry—including executives at Princess—to conclude that there remained a large untapped market of potential cruisers. In March 1997 a spokesman for Princess told Travel Weekly, “We [in the cruise industry] are about to enter an era of dramatic prosperity—a great boom and upswing in the economy.” Princess appeared amply prepared to accommodate that boom.